Download standardisation of tendering and contract

STANDARDISATION OF TENDERING AND
CONTRACT ADMINISTRATION
Richard Minter; [email protected]
Manager Consulting & Contracts, Maitland City Council, NSW
Abstract
Local government is continually being pushed to achieve “best practice” in all areas of its
operations. In the Hunter Region, one area that was failing to achieve this best practice standard
was tendering and contract administration. Most councils in the region had an unstructured and
uncontrolled approach to the tendering and contract management function. As a result, in early
1999, the Hunter Valley group of the then IMEA established a Regional Councils Contract
Administration Panel. Since its establishment, the Panel has developed standardised conditions
of tendering, general conditions of contract, tender schedules and expressions of interest
documents. The participating councils are now realising significant benefits through this regional
approach. These benefits include the establishment of best practice processes, minimised risk
exposure and the potential for lower tender submission costs.
Key Words: Contract, Tendering, Documentation, Conditions, Standardisation,
Insurance, OH&S.
Introduction
Tendering & Contract Administration
Contracts are no longer just the province of
engineering works. With the introduction and
implementation of National Competition
Policy, benchmarking, best practice and best
value, councils are preparing contracts that
cover almost all the fields of activity within
local government.
Unfortunately, most Councils in the Hunter
Valley have, until recently, had an
unstructured and uncontrolled approach to
this expanding tendering and contract
management function. As a result, in early
1999, the Hunter Valley Group of the then
IMEA resolved to convene a panel of contract
management specialists within the region to
explore ways of sharing information and
developing an improved standard of
documentation
for
tendering,
tender
evaluation and contract administration.
The New South Wales Government
Procurement Implementation Guidelines
highlight that the level of expertise that is
applied to procurement planning, tendering
and contract management can have a
significant and lasting impact on the cost of
efficient delivery of services.
In order,
therefore,
to
achieve
this
efficient
procurement, effective management and
appropriate skills and resourcing are
required.
In the light of this, the Hunter Valley IMEA
group saw that each Council had varying
approaches to the tendering and contract
administration function, with different levels
of skills and resources available. The group
saw that these skills and resources could be
combined and harnessed for the benefit of all
Councils in the region.
As a result, a Regional Councils Contract
Administration Panel was established in April
1999. The councils that make up the Panel
are Cessnock, Dungog, Gloucester, Gosford,
Great Lakes, Lake Macquarie, Maitland,
Merriwa,
Murrurundi,
Muswellbrook,
Newcastle, Port Stephens, Scone and
Singleton Councils.
To increase its standing and sphere of
influence, the contracts administration panel
has since come under the umbrella of the
Hunter Region Organisation of Councils
(HROC).
The Contracts Administration Panel was
established because the Hunter Valley IMEA
group perceived that there was a lack of
consistent documentation within existing
Councils, and in many cases, that suitable
documentation did not exist at all. As such,
the group saw a need to establish a forum in
which tendering and contract administration
procedures and documentation could be
standardised across the region.
tendering and contract documentation
designed for major contract works that was
unsuitable to the style or scope of the actual
project.
In terms of major contract works, Councils
were generally well covered, with most
Councils utilising documentation for their
General Conditions of Contract through
AS2124, AS4000, AS4300 or similar
appropriate documentation.
Along with the lack of suitable General
Conditions of Contract for smaller works,
goods or services, there was also seen to be
a need to standardise and formalise the
invitation to tender and conditions of
tendering components of the tender
documentation. Generally speaking, most
Councils did not have a formalised set of
conditions of tendering.
The Contracts Administration Panel
With Councils being driven toward the
establishment and implementation of best
practice procedures and processes, the
group also saw a need to establish the Panel
to allow global issues such as occupational
health and safety, insurances and contractor
performance reporting to be addressed on a
region wide basis.
The 1999 Contract Administration
Situation
Following the establishment of the Contracts
Administration
Panel,
each
of
the
participating Councils was surveyed to
determine their level of tendering and
contract documentation, areas of perceived
deficiency and areas of specific need.
The results of the survey confirmed the belief
of the IMEA group that the quantity and
quality
of
contract
and
tendering
documentation was relatively low across
most of the councils. Areas of particular
deficiency included minor building and
construction works, minor supply contracts,
minor design and construct contracts and
minor consultancy services. For these types
of contracts, documentation was either not
available or the council was utilising
Upon analysis of the results of the council
contracts
survey,
the
Contracts
Administration
Panel
identified
the
development of the following documents as
requiring the highest priority:

Information to tenderers document;

Conditions of tendering document,
and;

A suite of minor works conditions of
contract.
The overarching aim of the panel in seeking
to develop these documents was to ensure
that they remained appropriate to the size of
the projects at which they were aimed. That
is, they were to remain simple in terms of
layout, style and language, and were to be
kept as brief as possible.
During the development of the conditions of
contract documents, however, it was
discovered that there were large areas of
contract conditions that were consistent
across each of the project areas. As a result,
the development of a single, generic general
conditions of contract document covering the
supply of goods, works and services was
pursued.
In developing this conditions of contract
documentation, various existing publications
were reviewed, with components of each
incorporated into the panel’s minor goods,
works and services document.
This
documentation included Public Works and
Services publications, Australian Standards,
Royal Australian Army minor works general
conditions of contract, Victorian contracts
documents and Aus-Spec documentation.
Substantial review of the documents that
were being developed was undertaken
throughout the process. The documents
have been subject to review by council
solicitors, and along with internal Panel
review, detailed feedback was received from
contract specialists in organisations such as
the Department of Public Works and
Services.
Given the large number of Councils involved
in the project, particular attention had to be
made in regard to the specific needs of
individual councils. The Panel included very
large councils such as Newcastle, Lake
Macquarie and Gosford, medium size
councils such as Maitland and Cessnock,
and small councils such as Scone and
Merriwa.
The documentation had to be
tailored to suit each council, irrespective of its
size or structure.
In order to ensure that all councils would take
ownership of the work of the Panel and be
committed to its implementation, meeting
locations were rotated amongst the
participating councils. It was essential that
the process was not seen as just one or two
councils driving the process and the rest
following along.
Achievements of the Contracts Panel
In the two years since the establishment of
the panel, significant progress has been
made in achieving its objectives, with the
development of:

An
Information
document;
to
Tenderers

A Conditions of Tendering document;

A General Conditions of Contract
covering the provision of goods, works
and services up to a value of
$250,000;

Standardised tender schedules;

An Expression of Interest document;
and

The adoption of AS4000 for major
construction works with standardised
Annexures A & B developed.
The completion of these documents has only
been possible due to a considerable
investment by member councils to this
project. In excess of 700 hours of council
employee’s time has been made available for
Panel and sub-committee meetings so that
the development and review of these
documents could take place.
Problems and Difficulties
Problems and difficulties have arisen both in
the internal workings of the Contracts
Administration Panel and through usage of
the documents by service providers.
The main issues that have caused problems
and difficulties within the workings of the
Panel are occupational health and safety
(OH&S) and insurances. With regard to
OH&S, the Panel has been attempting to
develop a generic condition of contract that
can be incorporated into the documentation
covering this issue. However, due to the
changing nature of the OH&S legislation, this
has proved difficult. Attempts have been
made to enlist the support of the HROC
OH&S Panel in the development of the
standard
condition,
however
different
standards and work methods between the
various Councils at the OH&S level has
caused greater difficulties.
The area of insurances, and professional
indemnity (PI) insurance in particular, has
also provided problems for the Panel.
Various members of the group have received
conflicting reports from their insurance
brokers as to the level of PI required and the
ability for council to lower the level of cover
below the usually required amount of $10
million. The Panel has also faced difficulties
in this area when engaging consultants such
as accountants where their PI insurance is
capped by legislation at an amount much
less than that required by the insurance
brokers. These insurance issues are the
subject of ongoing dialogue between the
Panel and council’s brokers.
Whilst most service providers have been
positive in their feedback in regard to the
standardised
tendering
and
contract
documentation, some service providers have
felt uncomfortable with the generic nature of
the document. Some consultants have not
liked the document containing construction
related clauses. This, however, has been
easily dealt with through an annexure to the
contract.
The other main area that has caused
problems and difficulties with service
providers is the area of insurances and
standard of care. Service providers have
been trying to limit or shift liability back onto
councils by reducing their responsibility with
regard to standard of care or by wanting to
have insurance levels capped. The Panel
has resisted this push by the service
providers, as the responsibilities placed on
the service provider in the document are not
seen as unfair or onerous.
reporting. In this regard, the Panel has been
able to address recently occurring issues
such as the Building and Construction
Industry Security of Payments Act 1999 and
the Copyright Amendment (Moral Rights) Act
2000.
The participating councils also enjoy benefits
such as the elimination of duplication of
effort, maximised use of resources, greater
control of projects and a greater ability for
customer requirements to be met.
Where To From Here
Whilst a great deal has been achieved to
date by the Contracts Administration Panel,
the standardisation of tendering and contract
administration across the region is not yet
complete.
The Panel is proposing to
undertake the following works over the next
12 months:

Refinement and updates of General
Conditions of Contract and other
documentation already produced to
ensure that it is consistent with current
legislation and practices.

The development of a Contracts
Manual tailored to each individual
Council, based on a generic guideline
format. The identified need for the
development of this manual is in line
with the findings of the Independent
Commission
Against
Corruption
discussion paper on procurement and
contract
administration
in
local
government. In this discussion paper,
the Commission found that while many
councils
rely
on
pre-formatted
contracts
such
as
Australian
Standards Conditions of Contract
(AS2124-1992) or similar, such as the
Aus-Spec Series of contracts, there is
still great disparity between councils
when
it
comes
to
contract
administration. The development of
the contracts manual will overcome
disparity amongst the participating
councils.

The development of a service provider
database detailing information such as
Council Benefits Achieved
The participating Councils are realising
significant benefits and advantages through
adopting a regional approach to contract
administration. These benefits include the
opportunity to review and rationalise existing
practices and policies, the establishment of
“best practice” specifications and processes,
the minimisation of risk exposure, contractor
familiarity with cross regional practices and
requirements and the potential for the
lowering of tender submission costs.
The contracts panel has also established a
common forum to address global issues such
as
occupational
health
and
safety,
insurances and contractor performance
the service provider, the services
provided, the costs of the service and
Council contact details. The database
will allow member Councils to contact
each other to obtain comment on a
particular tenderer in regard to their
performance, or to identify possible
service providers that have experience
in the local government area for use
on individual projects.

The preparation of a database to
monitor
consultant’s
professional
indemnity cover and as a means of
ensuring that cover is continued and
maintained for a specific period
beyond the completion of their
contract.

The preparation of a specifications
database including Council contact
details that will enable each Council to
see what specifications other Councils
have. This will enable a free flow of
information
and
documentation
between each Council rather than
duplicating services by preparing
documentation from scratch.
Through the vision of the then Hunter Region
IMEA group, the establishment of a
Contracts Administration Panel covering
some fourteen Councils in the Hunter Valley
and Central Coast has resulted in the
development of a number of documents that
have enabled the tendering and contracting
process to be improved and controlled within
these participating Councils.
As a result, the Councils involved are
realising many benefits from the process.
The region-wide standard approach to tender
and contract documentation has portrayed a
professional image of local government to
the service providers as well as establishing
best practice processes and minimising the
risk exposure of the Councils.
As
familiarisation of the documents increases
amongst the service providers, Councils will
also benefit from reduced tender submission
costs.
The HROC Contract Panel encourages other
Councils to adopt this approach to contract
administration and enjoy the same benefits.
References
Conclusion
Until recently, most Councils in the Hunter
Valley have had an uncontrolled and
unstructured approach to the tendering and
contract management function. Experience
has shown that this approach left these
Councils vulnerable to mistakes and errors
that could have been extremely costly.
Independent Commission Against Corruption.
(2001). Taking the Con Out of Contracting,
Independent Commission Against Corruption,
Sydney.
New South Wales Government. (1999).
Implementation
Guidelines
NSW
Government Procurement, Department of
Public Works & Services, Sydney.
Author Biography
Richard Minter currently holds the position of Manager Consulting and
Contracts at Maitland City Council, with whom he has been for nearly
four years. Prior to this position, Richard was employed in the private
sector with a Newcastle based consultancy. He holds an honours
degree in Civil Engineering from the University of Newcastle, a
Graduate Certificate of Local Government Management and is
nearing the completion of a Master of Business Administration.
Richard is a foundation member of the Contracts Administration
Panel.
Postal Address: Richard Minter, Maitland City Council, PO Box 220,
Maitland, NSW, 2320.
E-mail: [email protected]